What the Dow Isn’t

Stocks misused as 'scorecard' of White House policy

To hear some in the corporate media tell it, you judge a president by how the Dow Jones Industrial Average is performing–and, thus, Barack Obama is not doing a very good job.

As NBC‘s Meet the Press host David Gregory said (3/1/09):

The Obama stimulus package, $787 billion. The housing plan, $75 billion. That’s $2.3 trillion. Seven hundred and fifty billion dollars additional in this document for additional bailout money for the banks. Meantime, what metric do we have to see how people–what people think of that government intervention? The Dow is one metric. It closed on Friday at its lowest level since 1997, just over 7,000.

MSNBC host Chris Matthews put it earlier (Hardball, 2/23/09):

How does [Obama] deal with the fact that he has a scorecard now. It’s called the Dow Jones…. No matter what they say, the Dow keeps going down. It’s down to almost 7,000 now. I used to think 8,000 was the floor. It’s heading toward 6,000! People are really getting angry! I’m getting angry!

Some of the commentary was even blunter. NBC‘s financial pundit Jim Cramer declared on the March 3 Today show that Obama is pursuing a “radical agenda” that amounts to the “greatest wealth destruction I’ve seen by a president.” When reporter Erin Burnett seemed to disagree slightly, Cramer retorted: “The stock market is the country right now. This is where people’s wealth is.”

But reporters and commentators are mistaken if they believe the Dow Jones average amounts to a public referendum on the Obama White House (or any other White House, for that matter). There is also little evidence that a rising stock market is necessarily tied to increased prosperity or broad economic health; it is a measure of what people who trade stocks think those stocks are worth, i.e. how much they think other traders would pay for them. As Dean Baker wrote in response to a Washington Post article (3/3/09), the value of the Dow is not a reliable indicator of much of anything: “As should be apparent at this point, the stock market can often be driven by irrational exuberance. Remember, it was almost three times as high in 2009 dollars back in 2000 as it is today. Did that make sense?”

“It took only 14 trading sessions for the Dow to fall from 8,000 to less than 7,000,” declared Today host Matt Lauer (3/3/09). As pointed out by Media Matters (3/3/09), MSNBC anchor Contessa Brewer seemed to more explicitly tie the market average to Obama: “Since Election Day, the Dow Jones industrial average has dropped nearly 3,000 points. It’s shed a quarter of its value in just the past two months.” The Dow had also lost more than 3,000 points in the six months prior to Election Day, which might suggest the problems started long before last November.

And such commentary certainly suggests that the downturn in the market is some sort of reaction to White House actions–rather than a response to the routinely downbeat reports from major corporations, indicating that they will make less money and hence be worth less to investors than they have in the recent past (and in the case of many major financial corporations, their balance sheets are worse than downbeat). As the Washington Post reported (3/5/09): “The U.S. recession is dragging down almost every industry in almost every part of the country and businesses do not expect conditions to improve until late this year at the earliest, according to a Federal Reserve report released yesterday.”

If reporters really want to assess public reaction to White House economic proposals, there is a much more straightforward way to do that: public opinion polls. Those show much more public support for the Obama administration than is evident among Wall Street investors–or millionaire TV journalists.